Federal judge shuts down Florida company that collected more than $100M for sham health plans

A federal court has temporarily shut down a sham health insurer that collected more than $100 million from consumers and left tens of thousands of people uninsured.

The South Florida company called Simple Health Plans LLC sold “worthless” plans to consumers, according to the Federal Trade Commission (FTC), which asked a U.S. District Court to halt the company’s operations while it seeks to permanently shut down the company. The agency said many consumers who purchased the sham coverage were left with substantial medical expenses and thousands of dollars in unpaid bills.

In a complaint (PDF) filed by the FTC, prosecutors alleged Simple Health Plans owner Steven J. Dorfman, who operated four other companies, preyed on consumers seeking health insurance beginning in 2013 through a network of lead-generation websites touting comprehensive, ACA-compliant coverage. In advertising materials, the company falsely claimed to be affiliated with AARP and the Blue Cross Blue Shield Association.

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“Many consumers were misled into thinking they had purchased comprehensive health insurance, but when they needed to rely on that insurance, they learned they had none of the promised benefits,” Andrew Smith, the director of the FTC’s Bureau of Consumer Protection, said in a statement. “The plans defendants were selling are not health insurance and they aren’t a substitute for health insurance.”

Consumers that submitted information on websites like "obamacare-plans.com" and “trumpcarequotes.com”—which billed itself as “health insurance for smart people”—were connected to a telemarketer working for Simple Health Plans that falsely claimed to be a registered insurance agent. Some paid as much as $500 a month for insurance that provided little to no coverage.

Often the plans offered just $100 per day for hospitalization and a maximum benefit of $3,200, and only for hospital stays of 30 days or more. An undercover FTC investigator was sold a plan that claimed to cover diabetes medications for $4 to $12 but actually cost $850-$900.

Additionally, some consumers were subject to the individual mandate penalty for failing to purchase coverage that met ACA coverage requirements. A preliminary injunction hearing is scheduled for later this month.